Venture Capital Finance and Exit Opportunities.Determinants of an Initial Public Offering.

This paper examines the determinants of a venture capital (VC)-backed initial public offering (IPO). Despite the importance of success for VC firms, only a handful of academic studies explored the factors driving performance. Besides that an overview of previous research documenting on these factors is presented, some determinants are empirically assessed using a sample of US venture capital investments covering the period 1984 – 2003. The empirical analysis indicates that experience of the VC firm itself does not have an impact on the likelihood of an IPO. Also, limited evidence is found in support of young VC firms’ ‘grandstanding’. Despite that, the ability of a fund’s manager and the level of syndication are important drivers of success. Finally, although no significant difference is found in the probability of an IPO between independent and captive VC firms, it can be concluded that the likelihood that public VC organisations exit investments through an IPO is significantly lower compared to independent VCs.